Franklin Resources Inc.

04/28/2026 | Press release | Distributed by Public on 04/28/2026 06:36

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
This Form 10-Q and the documents incorporated by reference herein may include forward-looking statements that reflect our current views with respect to future events, financial performance and market conditions. Such statements are provided under the "safe harbor" protection of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts and generally can be identified by words or phrases written in the future tense and/or preceded by words such as "anticipate," "believe," "could," "depends," "estimate," "expect," "intend," "likely," "may," "plan," "potential," "seek," "should," "will," "would," or other similar words or variations thereof, or the negative thereof, but these terms are not the exclusive means of identifying such statements.
Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors that may cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements, including market and volatility risks, investment performance and reputational risks, global operational risks, competition and distribution risks, third-party risks, technology and security risks, human capital risks, cash management risks, and legal and regulatory risks. The forward-looking statements contained in this Form 10-Q or that are incorporated by reference herein are qualified in their entirety by reference to the risks and uncertainties disclosed in this Form 10-Q and/or discussed under the headings "Risk Factors" and "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 ("fiscal year 2025").
While forward-looking statements are our best prediction at the time that they are made, you should not rely on them and are cautioned against doing so. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other possible future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. They are neither statements of historical fact nor guarantees or assurances of future performance. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.
The initiation or unfavorable resolution of legal proceedings or other claims and regulatory and other governmental investigations or inquiries, including the Western Asset Management ("WAM") investigations described under the heading "Risk Factors" and in "Note 15 - Commitments and Contingencies" to our audited financial statements contained in our Annual Report on Form 10-K for fiscal year 2025, and in "Note 10 - Commitments and Contingencies" to our unaudited interim financial statements contained in this Form 10-Q, may result in additional costs, monetary judgments, settlements or other remedies, including fines, penalties, restitution and/or alterations in our business practices or those of our investment groups. In addition, these matters may cause reputational harm to us or our investment groups and could result in additional expenses and collateral costs, outflows of assets under management or other financial impacts that could materially affect our results of operations and the price of our common stock.
If a circumstance occurs after the date of this Form 10-Q that causes any of our forward-looking statements to be inaccurate, whether as a result of new information, future developments or otherwise, we undertake no obligation to announce publicly the change to our expectations, or to make any revision to our forward-looking statements, to reflect any change in assumptions, beliefs or expectations, or any change in events, conditions or circumstances upon which any forward-looking statement is based, unless required by law.
In this section, we discuss and analyze the results of operations and financial condition of Franklin Resources, Inc. ("Franklin") and its subsidiaries (collectively, the "Company"). The following discussion should be read in conjunction with our Annual Report on Form 10-K for fiscal year 2025 filed with the U.S. Securities and Exchange Commission (the "SEC"), and the consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Words such as "we," "us," "our" and similar terms refer to the Company.
OVERVIEW
Franklin is a holding company with subsidiaries operating under our Franklin Templeton® and/or subsidiary brand names. We are a global investment management organization that derives operating revenues and net income from providing investment management and related services to investors in jurisdictions worldwide. We deliver our investment capabilities through a variety of investment products, which include our sponsored funds, as well as institutional and high-net-worth separate accounts, retail separately managed account programs, sub-advised products and other investment vehicles. Related services include fund administration, sales and distribution, and shareholder servicing, which we may perform directly or outsource to third parties. We offer our services and products under our various distinct brand names, including, but not limited to, Alcentra®, Apera®, Benefit Street Partners®, Brandywine Global Investment Management®, Canvas®, Clarion Partners®, ClearBridge Investments®, Fiduciary Trust International™, Franklin®, Franklin Mutual Series®, K2®, Legg Mason®, Lexington Partners®, O'Shaughnessy®, Putnam®, Royce®, Templeton®, and Western Asset Management Company®. We offer a broad product mix of equity, fixed income, alternative, multi-asset and cash management asset classes and solutions that meet a wide variety of specific investment goals and needs for individual and institutional investors. We also provide sub-advisory services to certain investment products sponsored by other companies which may be sold to investors under the brand names of those other companies or on a co-branded basis.
The level of our revenues depends largely on the level and relative mix of assets under management ("AUM"). As noted in the "Risk Factors" section of our Annual Report on Form 10-K for fiscal year 2025, the amount and mix of our AUM are subject to significant fluctuations, including as a result of reputational harm, that can negatively impact our revenues and income. The level of our revenues also depends on the fees charged for our services, which are based on contracts with our funds and customers, fund sales, and the number of shareholder transactions and accounts. These arrangements could change in the future.
During our second fiscal quarter, U.S. and global equity markets declined amid heightened volatility, driven by the escalation of geopolitical tensions in the Middle East, rising energy and gas prices, and renewed inflation concerns. The S&P 500 Index and the MSCI World Index decreased by 4.3% and 3.5%, respectively, for the quarter, and by 1.8% and 0.4% for the fiscal year to date. Global bond markets declined as the Bloomberg Global Aggregate Index decreased 1.1% during the quarter and 0.8% for the fiscal year to date.
Our total AUM at March 31, 2026 was $1,682.1 billion, 1% higher than at September 30, 2025 and 9% higher than at March 31, 2025. Monthly average AUM ("average AUM") for the three and six months ended March 31, 2026 increased 8% and 5% from the same periods in the prior fiscal year.
On October 1, 2025, we acquired Apera Asset Management ("Apera"), a pan-European private credit firm.
The business and regulatory environments in which we operate globally remain complex, uncertain and subject to change. We are subject to various laws, rules and regulations globally that impose restrictions, limitations, registration, reporting and disclosure requirements on our business, and add complexity to our global compliance operations.
Uncertainties regarding the global economy remain for the foreseeable future. As we continue to confront the challenges of the current economic and regulatory environments, we remain focused on the investment performance of our products and on providing high quality service to our clients. We continuously perform reviews of our business model. While we remain focused on expense management, we will also seek to attract, retain and develop personnel and invest strategically in systems and technology to support our evolving business. We will continue to seek to protect and further our brand recognition while developing and maintaining broker-dealer and client relationships. The success of these and other strategies may be influenced by the factors discussed in the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year 2025.
RESULTS OF OPERATIONS
Three Months Ended
March 31,
Percent
Change
Six Months Ended
March 31,
Percent
Change
(in millions, except per share data) 2026 2025 2026 2025
Operating revenues $ 2,294.9 $ 2,111.4 9 % $ 4,622.0 $ 4,363.0 6 %
Operating income 323.3 145.6 122 % 604.3 364.6 66 %
Operating margin1
14.1 % 6.9 % 13.1 % 8.4 %
Net income attributable to Franklin Resources, Inc. $ 268.2 $ 151.4 77 % $ 523.7 $ 315.0 66 %
Diluted earnings per share 0.49 0.26 88 % 0.95 0.55 73 %
As adjusted (non-GAAP):2
Adjusted operating income $ 474.6 $ 377.2 26 % $ 911.9 $ 790.0 15 %
Adjusted operating margin 27.1 % 23.4 % 26.1 % 24.0 %
Adjusted net income $ 384.5 $ 254.4 51 % $ 762.9 $ 574.9 33 %
Adjusted diluted earnings per share 0.71 0.47 51 % 1.41 1.06 33 %
_________________
1Defined as operating income divided by operating revenues.
2"Adjusted operating income," "adjusted operating margin," "adjusted net income" and "adjusted diluted earnings per share" are based on methodologies other than generally accepted accounting principles. See "Supplemental Non-GAAP Financial Measures" for definitions and reconciliations of these measures.
ASSETS UNDER MANAGEMENT
AUM by asset class was as follows:
(in billions) March 31,
2026 		March 31,
2025 		Percent
Change
Equity
$ 669.7 $ 598.1 12 %
Fixed Income 434.3 446.0 (3 %)
Alternative 282.8 251.8 12 %
Multi-Asset 207.5 175.8 18 %
Cash Management 87.8 68.9 27 %
Total $ 1,682.1 $ 1,540.6 9 %
Average AUM and the mix of average AUM by asset class are shown below.
(in billions)
Average AUM 1
Percent
Change 		Mix of Average AUM
for the three months ended March 31, 2026 2025 2026 2025
Equity
$ 699.6 $ 619.7 13 % 41 % 40 %
Fixed Income 439.3 456.3 (4 %) 26 % 29 %
Alternative 277.3 250.1 11 % 16 % 16 %
Multi-Asset 205.2 176.3 16 % 12 % 11 %
Cash Management 80.2 68.1 18 % 5 % 4 %
Total $ 1,701.6 $ 1,570.5 8 % 100 % 100 %
_______________
1Average AUM is calculated as the average of the month-end AUM for the trailing four months.
(in billions)
Average AUM 1
Percent
Change 		Mix of Average AUM
for the six months ended March 31, 2026 2025 2026 2025
Equity
$ 696.6 $ 625.1 11 % 41 % 39 %
Fixed Income 438.5 488.9 (10 %) 26 % 30 %
Alternative 272.8 249.6 9 % 16 % 16 %
Multi-Asset 201.2 176.2 14 % 12 % 11 %
Cash Management 80.5 66.5 21 % 5 % 4 %
Total $ 1,689.6 $ 1,606.3 5 % 100 % 100 %
_______________
1Average AUM is calculated as the average of the month-end AUM for the trailing seven months.
Components of the change in AUM are shown below. Net market change, distributions and other includes appreciation (depreciation), distributions to investors that represent return on investments and return of capital, and foreign exchange revaluation.
(in billions)
Three Months Ended
March 31,
Six Months Ended
March 31,
2026 1
2025
2026 1
2025
Beginning AUM $ 1,684.0 $ 1,575.7 $ 1,661.2 $ 1,678.6
Long-term inflows 118.2 86.8 236.8 183.7
Long-term outflows (101.3) (113.0) (191.9) (259.9)
Long-term net flows 16.9 (26.2) 44.9 (76.2)
Cash management net flows 11.4 2.7 10.2 2.7
Total net flows 28.3 (23.5) 55.1 (73.5)
Acquisition - - 6.1 -
Net market change, distributions and other (30.2) (11.6) (40.3) (64.5)
Ending AUM $ 1,682.1 $ 1,540.6 $ 1,682.1 $ 1,540.6
_______________
1Beginning in fiscal year 2026, non-fee generating uncalled capital commitments, which were previously included in net market change, distributions, and other, are reflected in long-term inflows in the period the capital is committed.
Components of the change in AUM by asset class were as follows:
(in billions)
Equity
Fixed Income
Alternative 1
Multi-Asset Cash
Management 		Total
for the three months ended
March 31, 2026
AUM at January 1, 2026 $ 697.2 $ 437.7 $ 273.8 $ 198.8 $ 76.5 $ 1,684.0
Long-term inflows 53.6 31.9 14.3 18.4 - 118.2
Long-term outflows (58.3) (32.2) (1.9) (8.9) - (101.3)
Long-term net flows (4.7) (0.3) 12.4 9.5 - 16.9
Cash management net flows - - - - 11.4 11.4
Total net flows (4.7) (0.3) 12.4 9.5 11.4 28.3
Acquisition - - - - - -
Net market change, distributions and other
(22.8) (3.1) (3.4) (0.8) (0.1) (30.2)
AUM at March 31, 2026 $ 669.7 $ 434.3 $ 282.8 $ 207.5 $ 87.8 $ 1,682.1
_______________
1Beginning in fiscal year 2026, non-fee generating uncalled capital commitments, which were previously included in net market change, distributions, and other, are reflected in long-term inflows in the period the capital is committed.
AUM decreased $1.9 billion during the three months ended March 31, 2026 due to the negative impact of $30.2 billion of net market change, distributions and other, partially offset by $16.9 billion of long-term net inflows, inclusive of $4.1 billion of long-term net outflows at WAM, and $11.4 billion of cash management net inflows. Long-term net inflows include $3.2 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $17.3 billion of market depreciation and $10.9 billion of distributions. The market depreciation occurred primarily in the equity asset class and reflected negative returns in the global equity markets, partially offset by appreciation in the alternative and multi-asset classes.
Long-term inflows increased 36% to $118.2 billion, as compared to the prior period, driven by higher inflows in equity, multi-asset and fixed income open-end funds, alternative private funds, equity exchange traded funds, multi-asset sub-advised mutual funds, equity and multi-asset separately managed accounts, and fixed income institutional separate accounts. Long-term outflows decreased 10% to $101.3 billion, substantially due to lower outflows across multiple fixed income vehicles at WAM, partially offset by higher outflows in equity open-end funds and exchange traded funds.
(in billions)
Equity
Fixed Income
Alternative
Multi-Asset
Cash
Management 1
Total
for the three months ended
March 31, 2025
AUM at January 1, 2025 $ 620.0 $ 469.5 $ 248.8 $ 174.0 $ 63.4 $ 1,575.7
Long-term inflows 38.9 26.5 8.5 12.9 - 86.8
Long-term outflows (44.3) (57.0) (2.1) (9.6) - (113.0)
Long-term net flows (5.4) (30.5) 6.4 3.3 - (26.2)
Cash management net flows - - - - 2.7 2.7
Total net flows (5.4) (30.5) 6.4 3.3 2.7 (23.5)
Net market change, distributions and other
(16.5) 7.0 (3.4) (1.5) 2.8 (11.6)
AUM at March 31, 2025 $ 598.1 $ 446.0 $ 251.8 $ 175.8 $ 68.9 $ 1,540.6
_______________
1Cash management at March 31, 2025 includes $6.3 billion of AUM and $3.7 billion of net inflows related to two money market mutual fund share classes previously closed to third-party investors.
(in billions)
Equity
Fixed Income
Alternative 1
Multi-Asset Cash
Management 		Total
for the six months ended
March 31, 2026
AUM at October 1, 2025 $ 686.2 $ 438.7 $ 263.9 $ 193.9 $ 78.5 $ 1,661.2
Long-term inflows 114.7 65.4 25.1 31.6 - 236.8
Long-term outflows (99.6) (68.1) (6.1) (18.1) - (191.9)
Long-term net flows 15.1 (2.7) 19.0 13.5 - 44.9
Cash management net flows - - - - 10.2 10.2
Total net flows 15.1 (2.7) 19.0 13.5 10.2 55.1
Acquisition - - 6.1 - - 6.1
Net market change, distributions and other
(31.6) (1.7) (6.2) 0.1 (0.9) (40.3)
AUM at March 31, 2026 $ 669.7 $ 434.3 $ 282.8 $ 207.5 $ 87.8 $ 1,682.1
_______________
1Beginning in fiscal year 2026, non-fee generating uncalled capital commitments, which were previously included in net market change, distributions, and other, are reflected in long-term inflows in the period the capital is committed.
AUM increased $20.9 billion, or 1%, during the six months ended March 31, 2026 due to $44.9 billion of long-term net inflows, inclusive of $10.6 billion of long-term net outflows at WAM, $10.2 billion of cash management net inflows, and $6.1 billion from the acquisition of Apera, partially offset by the negative impact of $40.3 billion of net market change, distributions and other. Long-term net inflows include $32.1 billion of long-term reinvested distributions. Net market change, distributions and other primarily consists of $54.1 billion of distributions, primarily from the equity and alternative asset classes, partially offset by $16.4 billion of market appreciation. The market appreciation occurred in all asset classes.
Long-term inflows increased 29% to $236.8 billion, as compared to the prior period, driven by higher inflows in equity, multi-asset, and fixed income open-end funds, alternative private funds, equity and fixed income exchange traded funds, fixed income, multi-asset, and equity separately managed accounts, alternative and fixed income institutional separate accounts, and multi-asset and fixed income sub-advised mutual funds, partially offset by lower inflows in equity sub-advised mutual funds. Long-term outflows decreased 26% to $191.9 billion, substantially due to lower outflows across multiple fixed income vehicles at WAM, partially offset by slightly higher outflows in equity and fixed income vehicles across other investment groups.
(in billions)
Equity
Fixed Income
Alternative
Multi-Asset
Cash
Management 1
Total
for the six months ended
March 31, 2025
AUM at October 1, 2024 $ 632.1 $ 556.4 $ 249.9 $ 176.2 $ 64.0 $ 1,678.6
Long-term inflows 94.8 52.9 11.9 24.1 - 183.7
Long-term outflows (87.7) (150.1) (4.7) (17.4) - (259.9)
Long-term net flows 7.1 (97.2) 7.2 6.7 - (76.2)
Cash management net flows - - - - 2.7 2.7
Total net flows 7.1 (97.2) 7.2 6.7 2.7 (73.5)
Net market change, distributions and other
(41.1) (13.2) (5.3) (7.1) 2.2 (64.5)
AUM at March 31, 2025 $ 598.1 $ 446.0 $ 251.8 $ 175.8 $ 68.9 $ 1,540.6
_______________
1Cash management at March 31, 2025 includes $6.3 billion of AUM and $3.7 billion of net inflows related to two money market mutual fund share classes previously closed to third-party investors.
AUM by sales region was as follows:
(in billions) March 31,
2026 		March 31,
2025 		Percent
Change
United States1
$ 1,187.5 $ 1,071.3 11 %
International
Europe, Middle East and Africa
217.4 183.3 19 %
Asia-Pacific2
180.1 171.0 5 %
Americas, excl. U.S.1
97.1 115.0 (16 %)
Total international 494.6 469.3 5 %
Total $ 1,682.1 $ 1,540.6 9 %
_______________
1Effective in fiscal year 2026, Cayman-domiciled money market fund assets are included in United States reflecting the underlying investor base. This change resulted in an 11% reduction of AUM in the Americas, excluding U.S.
2Effective January 1, 2026, Asia-Pacific includes India. Prior periods have been revised to reflect the current presentation.
The region in which investment products are sold may differ from the geographic area in which we provide investment management and related services to the products.
Investment Performance Overview
A key driver of our overall success is the long-term investment performance of our investment products. A measure of the performance of these products is the percentage of AUM exceeding peer group medians and benchmarks. We compare the relative performance of our mutual funds against peers, and of our strategy composites against benchmarks.
The performance of our mutual fund products against peer group medians and of our strategy composites against benchmarks is presented in the table below.
Peer Group Comparison1
Benchmark Comparison2
% of Mutual Fund AUM
in Top Two Peer Group Quartiles 		% of Strategy Composite AUM
Exceeding Benchmark
as of March 31, 2026 1-Year 3-Year 5-Year 10-Year 1-Year 3-Year 5-Year 10-Year
Equity 49 % 56 % 53 % 58 % 40 % 40 % 39 % 55 %
Fixed Income 80 % 78 % 75 % 79 % 83 % 74 % 82 % 94 %
Total AUM3
65 % 56 % 66 % 57 % 51 % 55 % 57 % 71 %
__________________
1Mutual fund performance is sourced from Morningstar and measures the percent of ranked AUM in the top two quartiles versus peers. Total mutual fund AUM measured for the 1-, 3-, 5- and 10-year periods represents 39%, 39%, 38% and 35% of our total AUM as of March 31, 2026.
2Strategy composite performance measures the percent of composite AUM beating its benchmark. The benchmark comparisons are based on each account's/composite's (strategy composites may include retail separately managed accounts and mutual fund assets managed as part of the same strategy) return as compared to a market index that has been selected to be generally consistent with the asset class of the account/composite. Total strategy composite AUM measured for the 1-, 3-, 5- and 10-year periods represents 55%, 54%, 54% and 50% of our total AUM as of March 31, 2026.
3Total mutual fund AUM includes performance of our alternative and multi-asset funds, and total strategy composite AUM includes performance of our alternative composites. Alternative and multi-asset AUM represent 17% and 12% of our total AUM at March 31, 2026.
Mutual fund performance data includes U.S. and cross-border domiciled mutual funds and exchange-traded funds, excludes cash management and fund of funds, and assumes the reinvestment of dividends.
Past performance is not indicative of future results. For strategy composite AUM included in institutional and retail separately managed accounts and investment funds managed in the same strategy as separate accounts, performance comparisons are based on gross-of-fee performance. For investment funds which are not managed in a separate account format, performance comparisons are based on net-of-fee performance. These performance comparisons do not reflect the actual performance of any specific separate account or investment fund; individual separate account and investment fund performance may differ. The information in this presentation is provided solely for use in connection with this document, and is not directed toward existing or potential clients of Franklin.
OPERATING REVENUES
The table below presents the percentage change in each operating revenue category.
(in millions)
Three Months Ended
March 31,
Percent
Change
Six Months Ended
March 31,
Percent
Change
2026 2025 2026 2025
Investment management fees $ 1,819.3 $ 1,673.6 9 % $ 3,667.2 $ 3,472.9 6 %
Sales and distribution fees 396.6 364.9 9 % 785.3 740.4 6 %
Shareholder servicing fees 69.0 61.9 11 % 139.9 125.4 12 %
Other 10.0 11.0 (9 %) 29.6 24.3 22 %
Total Operating Revenues $ 2,294.9 $ 2,111.4 9 % $ 4,622.0 $ 4,363.0 6 %
Investment Management Fees
Investment management fees increased $145.7 million and $194.3 million for the three and six months ended March 31, 2026 primarily due to an increase in average equity, multi-asset, and alternative AUM, an increase in performance fees and the acquisition of Apera, partially offset by the impact of WAM outflows.
Our effective investment management fee rate excluding performance fees (annualized investment management fees excluding performance fees divided by average AUM) was 41.0 and 40.8 basis points for the three and six months ended March 31, 2026, as compared to 41.4 and 40.7 basis points for the same periods in the prior fiscal year.
Performance fees were $100.8 million and $232.4 million for the three and six months ended March 31, 2026 and $71.9 million and $213.5 million for the same periods in prior fiscal year. The increase for both periods was primarily due to changes in the amount of performance fees earned by our alternative and equity investment groups.
Sales and Distribution Fees
Sales and distribution fees by revenue driver are presented below.
(in millions)
Three Months Ended
March 31,
Percent
Change
Six Months Ended
March 31,
Percent
Change
2026 2025 2026 2025
Asset-based fees $ 321.0 $ 297.2 8 % $ 645.6 $ 606.3 6 %
Sales-based fees 75.6 67.7 12 % 139.7 134.1 4 %
Sales and Distribution Fees $ 396.6 $ 364.9 9 % $ 785.3 $ 740.4 6 %
Asset-based distribution fees increased $23.8 million and $39.3 million for the three and six months ended March 31, 2026 primarily due to increases of 6% and 4% in the related average AUM and a higher mix of non-U.S. equity and multi-asset funds and U.S. equity and alternative funds, which generate higher fees.
Sales-based fees increased $7.9 million and $5.6 million for the three and six months ended March 31, 2026, primarily due to increases of 20% and 7% in commissionable sales, partially offset by a higher mix of non-U.S. sales, which generate lower fees.
Shareholder Servicing Fees
Shareholder servicing fees increased $7.1 million and $14.5 million for the three and six months ended March 31, 2026 primarily due to higher levels of related AUM and increased revenue related to fees earned on a contractual basis.
Other
Other revenue increased $5.3 million for the six months ended March 31, 2026 primarily due to higher loan origination fees earned by certain of our alternative investment groups.
OPERATING EXPENSES
The table below presents the percentage change in each operating expense category.
Three Months Ended
March 31,
Percent
Change
Six Months Ended
March 31,
Percent
Change
(in millions) 2026 2025 2026 2025
Compensation and benefits $ 964.7 $ 920.0 5 % $ 1,995.4 $ 1,911.4 4 %
Sales, distribution and marketing 544.0 498.1 9 % 1,084.9 1,010.4 7 %
Information systems and technology 157.6 158.7 (1 %) 314.6 314.7 0 %
Occupancy 67.1 69.3 (3 %) 133.9 144.4 (7 %)
Amortization of intangible assets 50.6 112.5 (55 %) 105.7 225.1 (53 %)
Impairment of intangible assets
- 24.4 NM - 24.4 NM
General, administrative and other 187.6 182.8 3 % 383.2 368.0 4 %
Total Operating Expenses $ 1,971.6 $ 1,965.8 0 % $ 4,017.7 $ 3,998.4 0 %
Compensation and Benefits
The components of compensation and benefits expenses are presented below.
Three Months Ended
March 31,
Percent
Change
Six Months Ended
March 31,
Percent
Change
(in millions) 2026 2025 2026 2025
Salaries, wages and benefits $ 457.7 $ 445.9 3 % $ 886.2 $ 869.5 2 %
Incentive compensation 415.3 387.0 7 % 886.3 826.4 7 %
Acquisition-related retention1
30.4 34.7 (12 %) 66.1 80.5 (18 %)
Acquisition-related performance fee pass through1
11.7 16.2 (28 %) 63.5 85.3 (26 %)
Other1,2
49.6 36.2 37 % 93.3 49.7 88 %
Compensation and Benefits Expenses $ 964.7 $ 920.0 5 % $ 1,995.4 $ 1,911.4 4 %
_______________
1See "Supplemental Non-GAAP Financial Measures" for additional information.
2Includes impact of gains and losses on investments related to deferred compensation plans, which is offset in investment and other income (losses), net; minority interests in certain subsidiaries, which is offset in net income (loss) attributable to redeemable noncontrolling interests; and special termination benefits.
Salaries, wages and benefits increased $11.8 million and $16.7 million for the three and six months ended March 31, 2026, primarily due to annual salary increases, higher post-retirement and employee insurance costs, and the acquisition of Apera, partially offset by the impact of cost savings initiatives.
Incentive compensation increased $28.3 million and $59.9 million for the three and six months ended March 31, 2026, primarily due to higher bonus expense based on expectations of our annual performance, and higher deferred compensation expense for the six month period, partially offset by lower sales-related commissions.
Acquisition-related retention expenses decreased $4.3 million and $14.4 million for the three and six months ended March 31, 2026, primarily due to lower costs associated with recent acquisitions.
Other compensation and benefits increased $13.4 million for the three months ended March 31, 2026, primarily due to a $12.8 million increase in special termination benefits, and increased $43.6 million for the six months ended March 31, 2026, primarily due to a $28.4 million increase in special termination benefits and higher net market gains on investments related to our deferred compensation plans. The special termination benefits increased primarily due to higher costs associated with workforce optimization initiatives.
At March 31, 2026, our global workforce remained flat at approximately 10,000 employees, as compared to March 31, 2025.
Sales, Distribution and Marketing
Sales, distribution and marketing expenses by cost driver are presented below.
Three Months Ended
March 31,
Percent
Change
Six Months Ended
March 31,
Percent
Change
(in millions) 2026 2025 2026 2025
Asset-based expenses $ 447.8 $ 411.4 9 % $ 905.6 $ 839.6 8 %
Sales-based expenses 70.9 67.9 4 % 131.2 131.8 0 %
Amortization of deferred sales commissions 25.3 18.8 35 % 48.1 39.0 23 %
Sales, Distribution and Marketing $ 544.0 $ 498.1 9 % $ 1,084.9 $ 1,010.4 7 %
Asset-based expenses increased $36.4 million and $66.0 million for the three and six months ended March 31, 2026 primarily due to increases of 7% and 6% in the related average AUM, higher marketing support fees, and a higher mix of non-U.S. equity and multi-asset funds and U.S. equity and alternative funds, which incur higher fees. Distribution expenses are generally not directly correlated with distribution fee revenues due to certain fee structures that do not provide full recovery of distribution costs.
Sales-based expenses increased $3.0 million for the three months ended March 31, 2026 primarily due to an increase of 20% in commissionable sales, partially offset by a higher mix of non-U.S. sales, and decreased $0.6 million for the six months ended March 31, 2026 primarily due to a higher mix of non-U.S. sales, partially offset by an increase of 7% in commissionable sales and lower sales-based marketing support fees.
Occupancy
Occupancy expenses decreased $2.2 million and $10.5 million for the three and six months ended March 31, 2026, primarily due to consolidation of our office space in New York City.
Information Systems and Technology
Information systems and technology expenses decreased $1.1 million and $0.1 million for the three and six months ended March 31, 2026, primarily due to lower technology consulting and spending related to strategic initiatives, substantially offset by higher costs for software and external data services.
Amortization of Intangible Assets
Amortization of intangible assets decreased $61.9 million and $119.4 million for the three and six months ended March 31, 2026, primarily due to intangible assets which became fully amortized during the prior fiscal year, partially offset by an increase in amortization due to the reclassification of certain indefinite-lived intangible assets to definite lived intangible assets and a reduction in the useful lives of certain definite-lived intangible assets related to trade names.
Impairment of intangible assets
During the three months ended March 31, 2025, we recognized an impairment charge of $24.4 million related to certain indefinite-lived intangible assets for acquired mutual fund investment management contracts.
General, Administrative and Other
General, administrative and other operating expenses increased $4.8 million and $15.2 million for the three and six months ended March 31, 2026. The increase for the three months ended March 31, 2026 was primarily due to an increase of $11.6 million in legal and other professional fees, driven by a $7.6 million decrease in insurance recoveries, and an increase of $2.4 million in fund-related expenses, driven by higher transfer agency and sub-advisory expenses, partially offset by lower fund administration costs and lower placement and platform fees. These increases were partially offset by a $10.6 million decrease in advertising expenses. The increase for the six months ended March 31, 2026, was primarily due to an increase of $17.9 million in fund-related expenses, driven by higher transfer agency and sub-advisory expenses, and an increase of $3.1 million in travel and entertainment, partially offset by a $6.3 million decrease in advertising expenses.
OTHER INCOME (EXPENSES)
Other income (expenses) consisted of the following:
Three Months Ended
March 31,
Percent
Change
Six Months Ended
March 31,
Percent
Change
(in millions) 2026 2025 2026 2025
Investment and other income, net:
Dividend and interest income
$ 38.7 $ 19.4 99 % $ 93.3 $ 62.5 49 %
Gains (losses) on investments, net (20.7) 46.8 NM (29.3) (10.3) 184 %
Income from investments in equity method investees 24.3 23.1 5 % 35.8 15.5 131 %
Losses on crypto assets, net (12.4) - NM (18.8) - NM
Rental income
11.6 10.9 6 % 22.9 22.1 4 %
Foreign currency exchange gains (losses), net 1.5 (7.5) NM (2.5) 7.0 NM
Other, net
13.0 1.4 829 % 34.9 7.8 347 %
Investment and other income, net 56.0 94.1 (40 %) 136.3 104.6 30 %
Interest expense (19.9) (20.8) (4 %) (40.3) (43.9) (8 %)
Investment and other income (losses) of consolidated investment products, net 96.5 (164.7) NM 221.4 (50.6) NM
Expenses of consolidated investment products (10.2) (11.5) (11 %) (24.2) (18.8) 29 %
Other Income (Expenses), Net $ 122.4 $ (102.9) NM $ 293.2 $ (8.7) NM
Dividend and interest income increased $19.3 million and $30.8 million for the three and six months ended March 31, 2026, primarily due to higher dividend and interest income earned from strategic investments and assets invested for deferred compensation plans.
Investments held by the Company generated net losses of $20.7 million and $29.3 million for the three and six months ended March 31, 2026, as compared to net gains of $46.8 million and net losses of $10.3 million for the three and six months ended March 31, 2025. The net losses in the three months ended March 31, 2026 were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, partially offset by gains from investments measured at cost adjusted for observable price changes, while the net gains in the prior year period were primarily from investments in nonconsolidated funds and separate accounts and assets invested for deferred compensation plans, partially offset by losses from investments measured at cost adjusted for observable price changes. The net losses in the six months ended March 31, 2026 were primarily from investments in nonconsolidated funds and separate accounts, partially offset by gains on investments measured at cost adjusted for observable price changes and assets invested for deferred compensation plans, while the net losses in the prior year were primarily from investments measured at cost adjusted for observable price changes and assets invested for deferred compensation plans, partially offset by losses on investments in nonconsolidated funds and separate accounts.
Equity method investees generated income of $24.3 million and $35.8 million for the three and six months ended March 31, 2026, as compared to income of $23.1 million and $15.5 million in the prior year, largely related to various global alternative funds.
Net foreign currency exchange gains were $1.5 million for the three months ended March 31, 2026, as compared to net losses of $7.5 million in the prior year period. The U.S. dollar strengthened in the three month period against the Euro and British Pound, which resulted in net foreign exchange gains on cash and cash equivalents denominated in U.S. dollars held by certain of our European subsidiaries, as compared to weakening against the same currencies, which resulted in net foreign exchange gains, in the prior year period. Net foreign currency exchange losses were $2.5 million for the six months ended March 31, 2026, as compared to net gains of $7.0 million in the prior year, as changes in the value of the U.S. dollar against the Euro and British Pound resulted in net foreign exchange losses in the current year as compared to net gains in the prior year.
Other, net increased $11.6 million and $27.1 million for the three and six months ended March 31, 2026, primarily due to gains recognized on the sale of owned office space.
Interest expense decreased $0.9 million and $3.6 million for the three and six months ended March 31, 2026 primarily due to interest recognized in the prior year on the $400 million senior notes which were repaid in March 31, 2025, partially offset by interest recognized on borrowings under our revolving credit facility.
Investments held by consolidated investment products ("CIPs") generated gains and other income of $96.5 million and $221.4 million for the three and six months ended March 31, 2026, largely related to gains on holdings of various alternative, equity, and multi-asset funds. Investments held by CIPs generated losses of $164.7 million and $50.6 million for the three and six months ended March 31, 2025, largely related to losses on holdings of various global equity funds, partially offset by gains on various alternative funds, and for the six month period, global fixed income and multi-asset funds.
Expenses of CIPs decreased $1.3 million and increased $5.4 million for the three and six months ended March 31, 2026, due to activity of the funds.
TAXES ON INCOME
Our effective income tax rate was 22.2% and 22.7% for the three and six months ended March 31, 2026, as compared to 72.8% and 31.5% for the three and six months ended March 31, 2025. The rate decrease for the three month period was primarily due to activity of CIPs for which there is no related tax impact and valuation allowances on net operating losses and capital losses recognized in the prior year period. The rate decrease for the six month period was primarily due to activity of CIPs for which there is no related tax impact, excess tax benefits related to stock-based compensation in the current year, as compared to excess tax expense in the prior year, and valuation allowances on net operating losses and capital losses recognized in the prior year.
Our effective income tax rate reflects the relative contributions of earnings in the jurisdictions in which we operate, which have varying tax rates. Changes in our pre-tax income mix, tax rates or tax legislation in such jurisdictions may affect our effective income tax rate and net income.
SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES
As supplemental information, we are providing performance measures for "adjusted operating income," "adjusted operating margin," "adjusted net income" and "adjusted diluted earnings per share," each of which is based on methodologies other than generally accepted accounting principles ("non-GAAP measures"). Management believes these non-GAAP measures are useful indicators of our financial performance and may be helpful to investors in evaluating our relative performance against industry peers.
"Adjusted operating income," "adjusted operating margin," "adjusted net income" and "adjusted diluted earnings per share" are defined below, followed by reconciliations of operating income, operating margin, net income attributable to Franklin Resources, Inc. and diluted earnings per share on a U.S. GAAP basis to these non-GAAP measures. Non-GAAP measures should not be considered in isolation from, or as substitutes for, any financial information prepared in accordance with U.S. GAAP, and may not be comparable to other similarly titled measures of other companies. Additional reconciling items may be added in the future to these non-GAAP measures if deemed appropriate.
Adjusted Operating Income
We define adjusted operating income as operating income adjusted to exclude the following:
•Elimination of operating revenues upon consolidation of investment products.
•Acquisition-related items:
◦Acquisition-related retention compensation.
◦Other acquisition-related expenses including professional fees, technology costs and fair value adjustments related to contingent consideration assets and liabilities.
◦Amortization of intangible assets.
◦Impairment of intangible assets and goodwill, if any.
•Special termination benefits and other expenses related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.
•Impact on compensation and benefits expense from gains and losses on investments related to deferred compensation plans, which is offset in investment and other income (losses), net.
•Impact on compensation and benefits expense related to minority interests in certain subsidiaries, which is offset in net income (loss) attributable to redeemable noncontrolling interests.
Adjusted Operating Margin
We calculate adjusted operating margin as adjusted operating income divided by adjusted operating revenues. We define adjusted operating revenues as operating revenues adjusted to exclude the following:
•Elimination of operating revenues upon consolidation of investment products.
•Acquisition-related performance-based investment management fees which are passed through as compensation and benefits expense.
•Sales and distribution fees and a portion of investment management fees allocated to cover sales, distribution and marketing expenses paid to the financial advisers and other intermediaries who sell our funds on our behalf.
Adjusted Net Income and Adjusted Diluted Earnings Per Share
We define adjusted net income as net income attributable to Franklin Resources, Inc. adjusted to exclude the following:
•Activities of CIPs.
•Acquisition-related items:
◦Acquisition-related retention compensation.
◦Other acquisition-related expenses including professional fees, technology costs and fair value adjustments related to contingent consideration assets and liabilities.
◦Amortization of intangible assets.
◦Impairment of intangible assets and goodwill, if any.
◦Interest expense for amortization of debt premium from acquisition-date fair value adjustment.
•Special termination benefits and other expenses related to workforce optimization initiatives related to past acquisitions and certain initiatives undertaken by the Company.
•Net gains or losses on investments related to deferred compensation plans which are not offset by compensation and benefits expense.
•Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income (loss) attributable to redeemable noncontrolling interests.
•Unrealized investment gains and losses.
•Net income tax expense of the above adjustments based on the respective blended rates applicable to the adjustments.
We define adjusted diluted earnings per share as diluted earnings per share adjusted to exclude the per share impacts of the adjustments applied to net income in calculating adjusted net income.
In calculating our non-GAAP measures, we adjust for the impact of CIPs because it is not considered reflective of our underlying results of operations. Acquisition-related items and special termination benefits are excluded to facilitate comparability to other asset management firms. We adjust for compensation and benefits expense related to funded deferred compensation plans because it is partially offset in other income (expense), net. We adjust for compensation and benefits expense and net income (loss) attributable to redeemable noncontrolling interests to reflect the economics of certain profits interest arrangements. Sales and distribution fees and a portion of investment management fees generally cover sales, distribution and marketing expenses and, therefore, are excluded from adjusted operating revenues. In addition, when calculating adjusted net income and adjusted diluted earnings per share we exclude unrealized investment gains and losses included in investment and other income (losses) because the related investments are generally expected to be held long term.
The calculations of adjusted operating income, adjusted operating margin, adjusted net income and adjusted diluted earnings per share are as follows:
(in millions)
Three Months Ended
March 31,
Six Months Ended
March 31,
2026 2025 2026 2025
Operating income $ 323.3 $ 145.6 $ 604.3 $ 364.6
Add (subtract):
Elimination of operating revenues upon consolidation of investment products* 15.5 13.1 31.5 25.6
Acquisition-related retention
30.4 34.7 66.1 80.5
Compensation and benefits expense from gains on deferred compensation, net 3.8 3.6 17.4 4.5
Other acquisition-related expenses 5.2 10.7 11.0 20.1
Amortization of intangible assets
50.6 112.5 105.7 225.1
Impairment of intangible assets
- 24.4 - 24.4
Special termination benefits
30.2 17.4 46.2 17.8
Compensation and benefits expense related to minority interests in certain subsidiaries 15.6 15.2 29.7 27.4
Adjusted operating income $ 474.6 $ 377.2 $ 911.9 $ 790.0
Total operating revenues $ 2,294.9 $ 2,111.4 $ 4,622.0 $ 4,363.0
Add (subtract):
Acquisition-related pass through performance fees
(13.9) (16.2) (68.9) (85.3)
Sales and distribution fees
(396.6) (364.9) (785.3) (740.4)
Allocation of investment management fees for sales, distribution and marketing expenses
(147.4) (133.2) (299.6) (270.0)
Elimination of operating revenues upon consolidation of investment products* 15.5 13.1 31.5 25.6
Adjusted operating revenues $ 1,752.5 $ 1,610.2 $ 3,499.7 $ 3,292.9
Operating margin 14.1% 6.9% 13.1% 8.4%
Adjusted operating margin 27.1% 23.4% 26.1% 24.0%
(in millions, except per share data)
Three Months Ended
March 31,
Six Months Ended
March 31,
2026 2025 2026 2025
Net income attributable to Franklin Resources, Inc. $ 268.2 $ 151.4 $ 523.7 $ 315.0
Add (subtract):
Net (income) loss of consolidated investment products* (0.6) (8.3) 0.1 (4.1)
Acquisition-related retention
30.4 34.7 66.1 80.5
Other acquisition-related expenses 10.1 13.1 17.6 25.8
Amortization of intangible assets
50.6 112.5 105.7 225.1
Impairment of intangible assets
- 24.4 - 24.4
Special termination benefits
30.2 17.4 46.2 17.8
Net (gains) losses on deferred compensation plan investments not offset by compensation and benefits expense (5.0) (1.1) (1.5) 0.2
Unrealized investment (gains) losses 32.7 (42.9) 52.9 (11.4)
Interest expense for amortization of debt premium (4.4) (5.0) (9.4) (9.9)
Net compensation and benefits expense related to minority interests in certain subsidiaries not offset by net income attributable to redeemable noncontrolling interests 9.0 7.4 16.4 11.5
Net income tax expense of adjustments (36.7) (49.2) (54.9) (100.0)
Adjusted net income $ 384.5 $ 254.4 $ 762.9 $ 574.9
Diluted earnings per share $ 0.49 $ 0.26 $ 0.95 $ 0.55
Adjusted diluted earnings per share 0.71 0.47 1.41 1.06
__________________
*The impact of CIPs is summarized as follows:
(in millions)
Three Months Ended
March 31,
Six Months Ended
March 31,
2026 2025 2026 2025
Elimination of operating revenues upon consolidation $ (15.5) $ (13.1) $ (31.5) $ (25.6)
Other income (expense), net 76.2 (129.8) 151.0 (68.3)
Less: income (loss) attributable to noncontrolling interests 60.1 (151.2) 119.6 (98.0)
Net income (loss) $ 0.6 $ 8.3 $ (0.1) $ 4.1
LIQUIDITY AND CAPITAL RESOURCES
Cash flows were as follows:
Six Months Ended
March 31,
(in millions) 2026 2025
Operating cash flows $ (282.7) $ (195.3)
Investing cash flows (1,675.9) (1,020.6)
Financing cash flows 1,978.5 380.3
Net cash used in operating activities increased during the six months ended March 31, 2026 primarily due to timing of cash receipts reflected in changes in receivables and lower net income adjusted for non-cash items, partially offset by lower payments for incentive compensation, accounts payable and accrued expenses. Net cash used in investing activities increased primarily due to higher net purchases of investments by collateralized loan obligations ("CLOs"), higher net purchases of investments and cash paid for an acquisition in current year partially offset by net proceeds from the sale of property, plant and equipment. Net cash provided by financing activities increased primarily due to higher net proceeds on debt of CIPs and higher net subscriptions in CIPs by noncontrolling interests.
The assets and liabilities of CIPs attributable to third-party investors do not impact our liquidity and capital resources. We have no right to the CIPs' assets, other than our direct equity investment in them and investment management and other fees earned from them. Certain CIPs utilize revolving credit facilities and other short-term lines of credit to support liquidity, including funding investment activity and managing timing differences associated with investor subscriptions and redemptions. Borrowings under these facilities, to the extent drawn, are generally secured by the assets of the respective CIPs and/or capital commitments from CIP equity investors. These facilities are interest-bearing, typically provided by third-party lenders, and are subject to customary borrowing terms and conditions. The debt holders of the CIPs have no recourse to our assets beyond the level of our direct investment and/or capital commitment, therefore we bear no other risks associated with the CIPs' liabilities. Accordingly, the assets and liabilities of CIPs, other than our direct investments in them, are excluded from the amounts and discussion below.
Our liquid assets and debt consisted of the following:
(in millions) March 31,
2026 		September 30,
2025
Assets
Cash and cash equivalents $ 2,540.3 $ 3,050.1
Receivables 1,317.7 1,228.6
Investments 1,178.5 1,367.5
Total Liquid Assets $ 5,036.5 $ 5,646.2
Liability
Debt $ 2,253.3 $ 2,362.0
Liquidity
Liquid assets consist of cash and cash equivalents, receivables and certain investments. Cash and cash equivalents at March 31, 2026 primarily consist of money market funds and deposits with financial institutions. Liquid investments consist of investments in sponsored and other funds, direct investments in redeemable CIPs, other equity and debt securities, and time deposits with maturities greater than three months.
We utilize a significant portion of our liquid assets to satisfy operational and regulatory requirements and fund capital contributions to sponsored and other products. Certain of our subsidiaries are required by our internal policy or regulation to maintain minimum levels of cash and/or capital, and may be restricted in their ability to transfer cash to their parent companies. Should we require more capital than is available for use, we could elect to reduce the level of discretionary activities, such as share repurchases or investments in sponsored and other products, we could raise capital through debt or equity issuances, or utilize existing or new credit facilities. These alternatives could result in increased interest expense, decreased dividend or interest income, or other dilution to our earnings.
Capital Resources
We believe that we can meet our present and reasonably foreseeable operating cash needs and future commitments through existing liquid assets, continuing cash flows from operations, amounts available under the credit facility discussed below, the ability to issue debt or equity securities and borrowing capacity under our uncommitted commercial paper private placement program.
In prior fiscal years, we issued senior unsecured unsubordinated notes for general corporate purposes and to redeem outstanding notes. At March 31, 2026, Franklin's outstanding senior notes had an aggregate principal amount due of $1,200.0 million. The notes have fixed interest rates from 1.600% to 2.950% with interest paid semi-annually and have an aggregate carrying value, inclusive of unamortized discounts and debt issuance costs, of $1,189.3 million. At March 31, 2026, Legg Mason's outstanding senior note had a principal amount due of $550.0 million. The note has a fixed interest rate of 5.625% with interest paid semi-annually and had a carrying value, inclusive of unamortized premium, of $714.0 million at March 31, 2026. Franklin unconditionally and irrevocably guarantees all of the outstanding notes issued by Legg Mason. We repaid the $450 million 4.750% senior notes due March 2026 using borrowings under our Amended and Restated Credit Agreement (the "Credit Agreement") and existing cash.
The senior notes contain an optional redemption feature that allows us to redeem each series of notes prior to maturity in whole or in part at any time, at a make-whole redemption price. The indentures governing the senior notes contain limitations on our ability and the ability of our subsidiaries to pledge voting stock or profit participating equity interests in our subsidiaries to secure other debt without similarly securing the notes equally and ratably. In addition, the indentures include requirements that must be met if we consolidate or merge with, or sell all of our assets to, another entity.
On December 11, 2025, we entered into a Joinder and Commitment Increase Agreement (the "Joinder Agreement") which amends the Credit Agreement dated as of April 30, 2025. Pursuant to the Joinder Agreement, the aggregate commitments have increased by $400.0 million such that the total aggregate commitments under the Credit Agreement are $1.5 billion. We expect to utilize the Credit Agreement periodically as part of our normal operations.
On January 8, 2026, we borrowed $150.0 million under the Credit Agreement which was repaid on February 9, 2026. On March 16, 2026, we borrowed $350.0 million under the Credit Agreement, the proceeds of which were used to repay the 4.750% Senior Notes due March 2026. On April 13, 2026, we borrowed an additional $50.0 million under the Credit Agreement. The aggregate borrowings of $400.0 million remain outstanding at the time of this filing. Interest is payable semi-annually on any outstanding amounts and is based on the Term Secured Overnight Financing Rate ("Term SOFR") plus a credit spread of 87.5 basis points and a Term SOFR adjustment of 10 basis points. The Credit Agreement contains a financial performance covenant requiring that the Company maintain a consolidated net leverage ratio, measured as of the last day of each fiscal quarter, of no greater than 3.25 to 1.00. We were in compliance with all debt covenants at March 31, 2026.
At March 31, 2026, we had $500.0 million of short-term commercial paper available for issuance under an uncommitted private placement program which has been inactive since 2012 and is unrated.
Our ability to access the capital markets in a timely manner depends on a number of factors, including our credit rating, the condition of the global economy, investors' willingness to purchase our securities, interest rates, credit spreads and the valuation levels of equity markets. If we are unable to access capital markets in a timely manner, our business could be adversely impacted.
Uses of Capital
We expect that our main uses of cash will be to invest in and grow our business including through acquisitions, pay stockholder dividends, invest in our products, pay income taxes and expenses of the business, enhance technology infrastructure and business processes, repurchase shares of our common stock, and repay and service debt. While we expect to continue to repurchase shares to offset dilution from stock-based compensation, and expect to continue to repurchase shares opportunistically from time to time, we will likely spend more of our post-dividend free cash flow investing in our business, including seed capital and acquiring resources to help grow our investment groups and operations.
We typically declare cash dividends on a quarterly basis, subject to approval by our Board of Directors. We declared regular dividends of $0.66 per share during the six months ended March 31, 2026 and $0.64 per share during the six months ended March 31, 2025. We currently expect to continue paying comparable regular dividends on a quarterly basis to holders of our common stock depending upon earnings and other relevant factors.
We maintain a stock repurchase program to manage our equity capital with the objective of maximizing shareholder value. Our stock repurchase program is effected through open-market purchases and private transactions in accordance with applicable laws and regulations, and is not subject to an expiration date. The size and timing of these purchases will depend on business conditions, price, market and other factors, including the terms of any 10b5-1 stock purchase plan that may be in effect at any given time. During the three and six months ended March 31, 2026, we repurchased 2.3 million and 4.1 million shares of our common stock at a cost of $57.1 million and $99.0 million and we repurchased 0.5 million and 0.8 million shares of our common stock at a cost of $10.0 million and $15.8 million in the prior year periods. In December 2025, our Board of Directors authorized the repurchase of up to an additional 20.8 million shares of our common stock in either open market or private transactions, for a total of up to 40.0 million shares available for repurchase under the stock repurchase program as of such authorization date. At March 31, 2026, 35.9 million shares remained available for repurchase under this authorization.
On October 1, 2025, we completed the acquisition of Apera Asset Management for cash consideration of €65.2 million net of closing adjustments, funded from existing cash. In addition, we will pay up to €125.0 million in cash through the fifth anniversary of the closing date based on achieving revenue targets.
As part of our acquisition of Putnam, which closed on January 1, 2024, we will pay up to $375.0 million between the third and seventh anniversaries of the closing date related to revenue growth targets from the strategic partnership with Great-West Lifeco, Inc., which will be recognized in operating income.
While we have no legal or contractual obligation to do so, we routinely make cash investments in the course of launching sponsored funds. The funds that we manage have their own resources available for purposes of providing liquidity to meet shareholder redemptions, including securities that can be sold or provided to investors as in-kind redemptions, and lines of credit. Increased liquidity risks and redemptions have required, and may continue to require, increased cash in the form of loans or other lines of credit to help settle redemptions and for other related purposes. We have in certain instances voluntarily elected to provide the funds with direct or indirect financial support based on our business objectives. We did not provide significant additional financial or other support to our sponsored funds during the six months ended March 31, 2026.
Our cash, cash equivalents and investments portfolio by asset class and accounting classification at March 31, 2026, excluding third-party assets of CIPs, was as follows:
Accounting Classification1
Total
(in millions) Cash and
Cash
Equivalents 		Investments
at
Fair Value 		Equity
Method
Investments 		Other Investments Direct
Investments
in CIPs
Cash and Cash Equivalents $ 2,571.5 $ - $ - $ - $ - $ 2,571.5
Investments
Alternative - 425.1 805.5 71.4 640.4 1,942.4
Equity - 339.1 178.9 165.2 182.4 865.6
Fixed Income - 301.4 67.6 34.7 114.4 518.1
Multi-Asset - 52.7 3.1 125.0 117.0 297.8
Total investments - 1,118.3 1,055.1 396.3 1,054.2 3,623.9
Total Cash and Cash Equivalents and Investments2, 3
$ 2,571.5 $ 1,118.3 $ 1,055.1 $ 396.3 $ 1,054.2 $ 6,195.4
______________
1See Note 1 - Significant Accounting Policies in the notes to consolidated financial statements in Item 8 of Part II of our Annual Report on Form 10-K for fiscal year 2025 for information on investment accounting classifications.
2Total cash and cash equivalents and investments includes $4,648.6 million maintained for operational activities, including investments in sponsored funds and other products, and $458.2 million necessary to comply with regulatory requirements.
3Total cash and cash equivalents and investments includes approximately $385 million attributable to employee-owned and other third-party investments made through partnerships which are offset in noncontrolling interests, approximately $419 million of investments that are subject to long-term repurchase agreements and other net financing arrangements, and approximately $397 million of cash and investments related to deferred compensation plans.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. These estimates, judgments and assumptions are affected by our application of accounting policies. Further, concerns about the global economic outlook have adversely affected, and may continue to adversely affect, our business, financial condition and results of operations including the estimates and assumptions made by management. Actual results could differ from the estimates. Described below are the updates to our critical accounting policies disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal year 2025.
Consolidation
We consolidate our subsidiaries and investment products in which we have a controlling financial interest. We have a controlling financial interest when we own a majority of the voting interest in a voting interest entity or are the primary beneficiary of a variable interest entity ("VIE"). Our VIEs are primarily investment products and our variable interests consist of our equity ownership interests in and investment management fees earned from these products.
Business Combinations
Business combinations are accounted for by recognizing the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition-date estimated fair values. Any excess of the purchase consideration over the acquisition-date fair values of these identifiable assets and liabilities is recognized as goodwill. Goodwill and indefinite-lived intangible assets are tested for impairment annually and when an event occurs or circumstances change that more likely than not reduce the fair value of the related reporting unit or indefinite-lived intangible asset below its carrying value. Definite-lived intangible assets are tested for impairment quarterly.
Subsequent to the annual impairment tests performed as of August 1, 2025, we monitored both macroeconomic and entity-specific factors, including changes in our AUM to determine whether circumstances have changed that would more likely than not reduce the fair value of the reporting unit below its carrying value or indicate that the other indefinite-lived intangible assets might be impaired. We also monitored fluctuations of our common stock per share price to evaluate our market capitalization relative to the reporting unit as a whole. During the six months ended March 31, 2026, there were no events or circumstances which would indicate that goodwill, indefinite-lived intangible assets or definite-lived intangible assets might be impaired.
While we believe that the assumptions used to estimate fair value in our impairment tests are reasonable and appropriate, future changes in the assumptions could result in recognition of impairment.
Fair Value Measurements
Our investments are primarily recorded at fair value or amounts that approximate fair value on a recurring basis. We use a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on whether the inputs to those valuation techniques are observable or unobservable.
As of March 31, 2026, Level 3 assets represented 4% of total assets measured at fair value, which primarily related to CIPs' investments in equity and debt securities. There were $25.6 million of transfers into and $16.8 million of transfers out of Level 3 during the six months ended March 31, 2026.
Franklin Resources Inc. published this content on April 28, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 28, 2026 at 12:39 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]